4:04pm: Broad rally offers a welcome reprieve from down weeks
The Dow closed Tuesday up 643 points, 2.2% to 30,532, the Nasdaq improved 271 points, 2.5%, to 11,069 and the S&P 500 added 90 points, 2.5%, to reach 3,765.
Traders now have to grapple with whether the upswing is here to stay. Sam Stovall, the chief investment strategist at CFRA Research, believes the S&P 500 could fall to 3,200, about 30% off its record high, before recovering.
“The outstanding question is whether this is simply a bounce or the bottom,” Stovall said, as reported by CNBC. “I think that this could certainly be a bounce but not the bottom because the one missing ingredient is a fear-based capitulation sell-off.”
12.05pm: Wall Street gains continue
US stocks continued to rise at noon as investors swooped in to bag a bargain after weeks of declines.
At midday, the Dow Jones Industrial Average had added 522 points at 30,411 points.
The S&P 500 was up 86 points at 3,761 points and the Nasdaq Composite had gained 310 points at 11,109 points.
IG chief market analyst Chris Beauchamp said the fact stocks were in a “buy everything” mode was a good thing but the real question was whether the bounce could last.
“It is up for debate whether stocks, once the initial energy has been expended, can turn this into something of at least a month,” he said. “Even then it seems unlikely that inflation and growth concerns will have really subsided enough for a longer-term move higher.”
In terms of major movers, electric vehicle maker Tesla Inc (NASDAQ:TSLA)’s shares had jumped about 11% at noon after the company’s CEO Elon Musk said it would be cutting 10% of its salaried workforce over the next three months.
Exxon Mobile Corporation’s shares had risen about 5% after it announced it was taking a 6.25% stake in the Qatar gas project, becoming the latest energy giant to invest big in non-Russian natural gas assets.
Kellogg Company (NYSE:K) shares were up about 4% following the news it would be splitting into three separate businesses focused on snacks, cereals, and plant-based foods.
Commenting on the fact the three companies’ names were yet to be decided, CMC Markets UK chief market analyst Michael Hewson said: “Sadly, there is no truth in reports that they will be called Snap, Crackle and Pop, because Snap is already taken.”
Meanwhile, US existing home sales fell in May for the fourth month in a row coming in at 5.4 million compared to 5.6 million in April, with sales tracking the steep decline in mortgage applications.
Pantheon Macroeconomics chief economist Ian Shepherdson described the picture as grim and set to become grimmer, as sales had a good deal further to fall.
“Housing is not the whole economy, but it is a disproportionate driver of how people think about the economy, given that everyone is either a homeowner or tenant,” he said. “We doubt that the Fed can keep hiking rates by 75 basis points per meeting as housing activity and prices fall rapidly.”
10.04am: Proactive North America headlines:
Elon Musk says US 'recession is inevitable'
Phunware unveils PhunWallet 1.3 update featuring QR code PhunToken reward functionality
AIM ImmunoTech inks lease deal for new state-of-the-art product development and testing facility in New Jersey
American Battery Technology announces positive drill results from its initial exploratory subsurface drill program at its Tonopah Flats Lithium Project
Fobi AI (TSX-V:FOBI, OTCQB:FOBIF) launches new partnership with top loyalty and brand marketing provider Yotpo
BetterLife Pharma to present BETR-001 preclinical data at FENS Forum in Paris, France in July
Irwin Naturals plans to expand chain of psychedelic mental health centers into Georgia with acquisition of two clinics from Invictus Clinic
Dalrada brings on Brian McGoff as its new president and COO
Mandalay Resources hits high-grade gold in drilling at its Björkdal operation in Sweden
Burcon NutraScience executes $10M loan agreement with Large Scale Investments to fund plant-based technology commercialization efforts
Gevo inks agreement to supply Finnair with 7 million gallons of sustainable aviation fuel per year for five years
Essex Minerals hails first phase exploration on Mt Turner copper-moly-gold project by Meryllion Resources
Wellbeing Digital Sciences (NEO:MEDI.AQN, OTCQB:KONEF) appoints Natalie Dolphin as VP of marketing and investment relations
FPX Nickel executes development memorandum of agreement with indigenous partner for Decar Nickel District
Solstice Gold Corp starts Phase 1 drilling at 100%-owned Red Lake Extension project
Cabral Gold says very encouraged by tests on gold-in-oxide material at MG target at Cuiú Cuiú project, Brazil
CULT Food Science Corp files third patent application for cultured meat enriched with cholesterol-lowering supplements
Looking Glass Labs says CEO to speak about NFTs in Hollywood at Collision Conference
Levitee Labs (CSE:LVT) appoints economist David Bentil as chief executive officer
PowerTap Hydrogen Capital updates on its continued efforts in California and recent participation in the California Hydrogen Leadership Summit
9.35am: Bargain hunters swoop in
US stocks opened higher on Tuesday with market activity expected to pick up following the long weekend as bargain hunters strike after last week’s steep losses.
Just after the open, the Dow Jones Industrial Average had gained 435 points at 30,324 points.
The S&P 500 had gained 65 points at 3,740 points and the Nasdaq Composite was up 192 points at 10,989 points.
OANDA senior market analyst Craig Erlam said this week there would be a particular focus on what the various central banks have to say.
“Jerome Powell's testimony in Congress on Wednesday and Thursday will naturally be the highlight but in this rapidly changing environment, all views will have the potential to get things moving,” he said. “There's no doubt that the next few days have far more on the calendar so investors may take the opportunity to breathe and take stock of the situation.”
But he noted that small recoveries in stock markets shouldn’t provide any comfort.
“Everyone is hunting for the bottom but there's a huge cloud of uncertainty over the outlook and the data isn't yet showing any encouraging signs,” Erlam said. “Recession is increasingly becoming the base case and so equities are vulnerable to further losses.”
6.30am: Positive post-holiday return
US markets were expected to open broadly higher on Tuesday after the long holiday weekend with bargain hunters expected to be making the most out of the recent steep falls in equities.
While prevailing concerns about the likelihood of a recession against a backdrop of higher interest rates have not been displaced, but the tumult brought on by weeks of falls has opened up buying opportunities.
Futures for the Dow Jones Industrial Average gained 1.6% in pre-market trading, while those for the broader S&P 500 index added 1.8%, and contracts for the Nasdaq-100 were up 1.8%.
US markets were closed yesterday for Juneteenth, a federal holiday marking the emancipation of African American slaves.
“Stock futures are shaking off some of the pessimism that we saw last week, and this is pointing to a higher open for both the European and US futures,” said Naeem Aslam, chief market analyst at avatrade.com.
“There is no doubt that the equity markets on both sides of the world have been massively oversold, bargain hunters have been preparing their lists for a while, and now they are out shopping,” he added.
But as recent history has proved, it remains to be seen if the bargain-hunting will last and trading is expected to remain cautious. After all, the backdrop of rising prices and aggressive interest rate hikes has not changed. Last week, all three major indexes closed at their lowest levels since 2020 after the US Federal Reserve lifted interest rates by 75 basis points.
Aslam noted that buying could fizzle out as the fundamentals that pushed the markets lower have not shifted: “And Fed officials in the US are only adding more noise. For instance, James Bullard said yesterday that the US economy isn’t going to shrink, and it will expand more aggressively than the market expectations.”
“In addition to this, there are still no signs that can flag when inflation in the US will reach its peak, and this is even more worrying for investors and traders,” he added.
In data due out today US existing home sales will be in focus with the headline figure expected to show that property sales are easing.
On energy markets, WTI crude oil futures gained 2.5% to $110.64 a barrel and Brent crude futures added 2.6% to $116.06.
Contact the author at jon.hopkins@proactiveinvestors.com